On improving taxation by self-assessment

The main idea: tell people what their house is worth, and tax that value, but also offer to buy at that price.

0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 13.04.2023, and the current version may have been updated several times from its original form. 

1.1 I am rather fond of the concept of taxing the self-assessed value of something, usually implemented by requiring owners to declare a value at which they must sell the object to anyone, and upon which value the tax is applied. Indeed, I’ve relied on this mechanism myself here.

1.2 But there is a rather obvious drawback of this approach: it effectively transfers the actual ownership of the object away from the owner and, indeed, away from anyone. Well, anyone except the state which pays no tax, in practice making all sectors on which it is applied fall under de facto government ownership.

1.3 But a minor improvement may easily take care of this issue: instead of asking, tell the owner what you (the tax collector) think the object is worth, upon which value you then calculate your tax. And give them the option to sell to you at that price, which offer you cannot refuse.

1.4 Now, we do veer away from the close tracking of the subjective value of the object that we enjoyed in the original version, but we still retain the ability to charge discriminatory pricing, as long as we can guess close enough to (but still below) the subjective value of the object to the owner.

1.5 And if we overshoot, now we incur a real, tangible cost as we may be unable to sell back to anyone else at a price that allows a profit.

1.6 Given both the degree of guesswork / modelling required, and the financial risk associated with failure, I’d expect that the operation of the system would be farmed out to private contractors, who’d then pay a portion of tax revenue to the government, but who’d bear the full cost of the scheme, mainly of buying high when guessing wrong. The government only has to set the tax rate, whilst letting bidders offer the highest rate they’d be willing to pay back to the treasury.

1.7 Finally, I’d love to be able to think of a way to integrate any offer made on the object (not just from the Treasury) into the system, but cannot think of a reason for a private bidder to disclose their failed bids. Homework for the private tax farmers.